Thinking Through Health Exchanges

TennCare Director Darin Gordon has distinguished himself by asking hard questions about the impact of the Affordable Care Act.

Open enrollment in the new health exchanges mandated by the Affordable Care Act (ACA) is two years away (Supreme Court permitting, of course). But according to Darin Gordon, director of Tennessee's Medicaid program TennCare and vice president of the National Association of Medicaid Directors (NAMD), many states are just beginning to understand the full range of the impact the ACA could have.

Over the course of the past year, Gordon has made a reputation for himself by asking tough questions about the impact of the ACA on the state insurance market and on economic competitiveness, questions born of his experience as the longest-serving TennCare director in the agency's history. I caught up with Gordon after the recent NAMD annual conference to talk about how the Volunteer State was thinking through the challenges of how -- and whether -- to implement an exchange in this edited and condensed transcript.

You've said that people need to think more carefully about the ways the new health exchanges will interact with existing Medicaid programs. What do you see as the trickiest points of intersection?

There are basically three areas around exchange planning. There's governance, there's the insurance market and there's exchange operations. It seems to me as though there's been a great deal of focus on how to get the governance structure right, which isn't a bad thing. It's a necessary step. But unfortunately, I think in some instances folks are spending more time trying to ascertain who is going to have a seat at the table than working on some of the areas that have more far-reaching implications: the impact of exchanges on the insurance market and then exchange operations themselves.

Let's talk about the potential impact of exchanges on the state insurance market. What are some of your concerns?

Well, it's obviously different from state to state, but let's look at the individual insurance market here in Tennessee. Some states have already taken steps to further regulate that market in the areas of guaranteed issue [guaranteed acceptance of enrollees regardless of health condition] and modified community rating [calculating premiums based on community risk factors rather than individual risk factors]. But there are other states, such as ours, that have not necessarily chosen to take those additional regulatory steps.

We're moving from medical underwriting to guaranteed issue in 2014. We're moving from exclusions and riders which say that certain pre-existing conditions are not covered, to [new rules that require that] all conditions covered on the first day. Where today we have premiums adjusted for age, tobacco, geography, health, gender, etc., we're going to be moving to premiums being adjusted for age, tobacco and geography only. We may be moving from having a group of state-level benefit mandates, which will differ with varying requirements, to a new essential health benefit (now a national standard), which has yet to be fully defined.

So having all that occur at the same time you are trying to manage a mass expansion in Medicaid enrollment, and having the new player [the exchange] come on the scene, where you have folks in the exchange and folks outside of the exchange -- what's that interplay? Our goal, as we're looking at what's the best solution for Tennessee, is trying to make sure that we approach this thoughtfully and ensure as much market stability as is absolutely possible. The last thing we want to see as we go through these changes is significant market disruption to the point that we don't have the competitive marketplace we believe we have today.

Presumably the worst case scenario would be to have insurers pull out of the state because...

Because we didn't approach it intelligently. Yes, absolutely.

The ACA allows states to either set up their own health exchange or have the federal government come in and set up an exchange for them. More recently, the Centers for Medicare & Medicaid Services (CMS) has also floated the possibility of a hybrid partnership model. Tennessee hasn't made a decision on whether it's going to create a state exchange or not, but you've created the Tennessee Insurance Exchange Planning Initiative to sort of prepare and keep your options open. Could you explain what you're doing?

We spent the last year meeting with a wide variety of stakeholders, traveling thousands of miles, having literally hundreds of meetings just to solicit feedback from various stakeholders, whether they be businesses, agents, brokers, insurers, providers, advocates, you name it. We've had a discussion with them about what an alternative to a federal exchange might look like. We spent over a year doing that and we've released a draft white paper that lays out some alternatives based on those discussions. Then we will be meeting with [Gov. Bill Haslam] in December to give him a report based on what all we've heard, and then hope to have a recommendation on whether the state should operate the exchange or whether we should defer that authority to the federal government.

Let's talk a little bit about exchange operations and the problem of churn. When Medicaid directors and others talk about churning and the need to address it, what are they talking about?

Churn is what happens when people have to move back and forth between or among programs because some factor in their eligibility changes. For example: An adult could be Medicaid eligible when reform starts in 2014. But because he gets a small raise, he has to move out of Medicaid and into the exchange. His children may still be in Medicaid, or maybe one of them is in Medicaid and one in [the state Children's Health Insurance Program].

This is an area that concerns me a lot because government typically designs new programs and then we all talk about how we make people's transition between the new and old programs more smooth, as opposed to just redesigning multiple legacy programs into a single, more functional program. If you look at all the different programs we have, they all offer subsidized health-care coverage based on different criteria. We set up multiple programs that basically do, in essence, the same thing in the end and then struggle with how to help folks transition between them. We are trying to identify ways to minimize the disruption that will occur as people move from program to program when their circumstances change.

Tennessee's "bridge plan" has gotten a lot of attention as a possible solution. Could you explain it?

The bridge plan would basically allow states to offer an alternative to those individuals who have had Medicaid in the recent past. This plan would only be available to those individuals and, in essence, the health plans that would be in that bridge option would be those Medicaid plans that currently provide services to our members. That means that when an individual's circumstances change, then they would have the ability to stay with the same health plan, and the family could stay together. We think that this approach would assist in minimizing some of the issues around churn while also addressing some of the confusion that some family members would have when different members of the family are eligible for different public programs.

What's has reaction from CMS been to this idea?

I think there's been a lot of interest at the CMS level to try to address the issue but it's been somewhat of a challenge to get everyone to get to an actual approval.

What are some of the more pressing questions that CMS hasn't answered yet about exchanges and about exchange design?

The area that is of most concern to us from a timing perspective, again, is the bridge product. That's an important thing for us because it really helps determine where we may go from here. There are several steps the various health plans will have to make with the state insurance commissioner if the bridge option becomes a real option for us.

We also need some guidance on what the federal essential health benefits will be. The law requires that the full actuarial value of any state-mandated health benefits offered by qualified health plans that are not included in the [federal] essential health benefits must be fully funded with state funds. Our Legislature returns this January and if action will be needed regarding the state-mandated benefits, it will have to occur during this session.

There are still questions related to CMS's [September] proposed hybrid partnership model of running exchanges with the states. They came out with a proposal which didn't really feel like a partnership; it was actually still a federal plan. States were expecting some things that they didn't necessarily see with the proposal that was shared. If the feds want to be able to assist states that choose to operate their own exchange, the federal government should consider developing the process for determining the exemptions from the individual mandate. They could develop the rating system for plan quality and cost metrics. They could develop enrollee satisfaction tools and measurements. Consistency here might be helpful and it should reduce some level of the implementation complexity for the states. Also, the determination of the affordability and the minimum value of employer-sponsored insurance, that's going to be challenging. Some have even talked about having the federal government determine the eligibility for the premium tax credits altogether.

The states have had additional discussions with the federal government on this front. I know they are taking another look at this given the feedback; however, we really do not have enough clarity to be able to determine whether these are functions that the federal government is truly willing to take on.

We're also looking at the process CMS is proposing for what states will be required to do if changes are needed to their programs once fully operational. What has been discussed thus far is a process similar to the State Plan process used in Medicaid. That process is very cumbersome. It's also perplexing given that the state-based exchanges are supposed to be self-sustaining and not dependent on federal funding for ongoing operations, yet states would be required to get federal approval for changes they feel are appropriate. If no federal funding is involved at that point, why should states have to keep going back and asking for federal permission? That makes no sense.

It would also be enormously helpful to the states to have the final exchange rules. While the draft rules were released in the last several months, the comments that were submitted during that time may potentially reshape those rules. At times, CMS has said, "Look, we've answered that in our regulations." But then other times we talk to them about concerns with some of the regulations and their comments are: "Well, submit your comments and we'll change it."

Well, which is it? Are they set in stone, or are they still being shaped? If they are set in stone, we have concerns that have not been addressed, and if they are still being shaped, we have problems, because we need answers now. Not knowing what the final rules will be makes conceptualizing these complex systems much more challenging.

This brings me to a big question. Former CMS Administrator Don Berwick spoke at the NAMD conference and I was struck by how he began his speech. He said, "This is a speech that might fail." I think that why he said that was because his speech was very much about changing the delivery system, improving the quality, and not about helping the states pare costs.

Yeah, absolutely. The states are in the position where we need solutions that could be implemented quickly and see savings in the next several months. The things that he discussed were items that require some significant lead time for implementation and would take a great deal of time before you start seeing the financial benefits.

Right. So was it a speech that succeeded, or was it a speech that failed?

The way that I interpreted it was that the solutions that he was talking about were not necessarily the solutions that can solve the immediate problems we have, from a financial perspective. I believe that his speech sought to explain the types of things we should be looking at just beyond the immediate -- which is fair. The way that I've described it is it's like saying to someone, "We have this fire on our doorstep," and them responding by talking about constructing a fire suppression system in the front room. While it is important to be thinking of the things to minimize these fires in the future (and to the extent bandwidth exists to do so, it is advisable) we have to be focused on the incredible challenge of fighting the fire that is right in front of us first. When the immediate crisis is contained, looking at and implementing various mid to long term strategies to limit future problems must occur, or else the crisis will become far too common.

Let's talk about the vendors with whom states and the feds will have to work. When I talk to vendors, there's a lot of frustration about the high cost of responding to vague RFPs.

If you really look at it, in all fairness to everybody, the timelines are incredibly short and there are many IT projects currently ongoing. In the area of e-health, for example, states are deploying electronic health record systems and setting up infrastructure that allows those systems to interface and exchange information in a seamless and coordinated fashion. Other states have been retooling their Medicaid management information systems while others are working on new eligibility systems. And then, with the insurance exchanges, most every state and the federal government will be coming to market at the same time trying to get quality contractors in to stand these up as well. We've already started to see a strain in that market with respect to having enough people with the right skills to help implement these types of systems successfully. My concern is that when the federal government and the larger states go out to bid on these projects, they will garner the best of the remaining resources. The other states may then be further challenged in finding experienced people with the right skills to stand these things up. The resource challenge coupled with the aggressive timelines make this a very real concern.

Must Reads

-- According to a Commonwealth Fund study, health insurance premiums for family policies increased by more than 50 percent between 2003 and 2010. This interactive map provides a state-by-state breakdown.

-- The U.S. Supreme Court announced that it will hear a lawsuit targeting the Affordable Care Act next spring. Progressives were startled that the court set aside time to consider whether the Medicaid expansion component of the ACA was constitutional. Kaiser Health News developed this helpful infographic identifying the legal issues before the court.